The Big Question: Retirement policy reform

Each month we ask leading industry figures to answer one big question... As we come to the first anniversary of the coalition government, what do you think about their approach to retirement policy reform?

Robert Branagh is managing director for ­administration at RPMI

There have been some good ­developments, such as the modifications made to tax relief and auto-enrolment requirements, but other areas of policy reform have not been as well thought out. Notably, the policy relating to the switch of pension increases from RPI to CPI seemed to be rushed and has scope to be to the coalition government what dividend tax credit changes were to Gordon Brown.

At this stage, it is probably too early to say whether the pledge to ­“reinvigorate occupational ­pensions” will be met and further details on key items of policy reform, such as the development of the proposed state pension reform, will need to be made available ­before this can be judged further.

Philip Brown is head of ­retirement ­products at ­Partnership

In my opinion, the benefits that a Tory-Lib Dem coalition government can bring to policy development has been positively demonstrated by its approach to retirement policy so far. For example, much of the thrust behind the policy to scrap ­compulsory annuitisation at age 75 has been driven to meet a ­Conservative policy objective to help consumers with larger fund values benefit from real choice. 

Equally, these proposals meet the policy objectives of the pensions ­minister, by throwing their weight behind the right for all consumers ­at retirement to receive greater incomes in retirement by shopping around for the best ­annuity rate.
This is a big step forward in assisting consumers to make informed ­decisions, and completes a journey Webb initiated when he raised an amendment to the Finance Bill ­debate on this topic a decade ago.

Andrew Tully is pensions ­technical ­manager at MGM Advantage

While the government has shown a commendable willingness to listen, the speed of change is the most eye-catching aspect.

Scrapping the Age 75 rule is ­arguably the change that will resonate most with the ordinary consumer, giving a perception of control which will encourage people to save for their retirement.

It has always been the case that people should regularly review their position as they move through ­retirement. But without the ­‘backstop’ of Age 75 to force people into action, there is a genuine risk that clients will unknowingly drift into unsuitability. Without appropriate advice, this could ultimately be very damaging for their wealth.

Gemma ­Goodman is head of The Annuity ­Bureau and DC ­Operations

The coalition has shown extraordinary ­commitment by tackling the larger issues ­affecting the pensions industry, but how much do these revolutionary changes affect the average ­person approaching retirement? The ­answer is: not a lot.

Recent research has revealed that when it comes to retirement, only 33% of people use the open market annuity option, meaning 67% of people are missing out on the ­opportunity to increase their income in retirement.

The government has expressed its frustration at the lack of people taking the open market option and has suggested it will consider taking legislative action if the insurance industry does not make the option operate more effectively. An undeniably firm step would be to make the open market option compulsory.

Peter Carter is product ­marketing ­director at MetLife

It should be a happy first year for the coalition in terms of retirement policy reform. They’ve scrapped compulsory ­annuitisation at age 75, as well as the default retirement age, while outlining reform of the state pension.

So far, so good would be my verdict on its first year. We are still waiting to see some clear ­action on how they will approach the debate on the ­default open ­market option, although the early signs are hopeful.

The glaring omission is a strategy for increasing pension saving by younger people. It is clear that more needs to be done to encourage ­saving and so far, there seems to be no co-ordinated plan to do this.

Robert Graves is head of ­pensions ­technical ­services at ­Rowanmoor ­Pensions

The coalition is ­moving in generally the right direction, ­bringing forward the rise in the state pension age. ­Removing the default retirement age allows ­individuals to retire later, and the Age 75 reforms give greater ­flexibility.

While auto-enrolment and NEST aim for greater take-up of ­pension saving, there is concern that employer schemes will be dumbed down. Creating a simple universal state pension will help individuals plan, but the government should take care not to undermine ­pension tax advantages. Abandoning early access was ­sensible, but they ­missed a trick in not allowing tax-­favourable inheritability of pension funds into beneficiaries’ pension ­arrangements.